The E-axes Forum on Climate Change, Macroeconomics, and Finance

Gregor Semieniuk

“Low-carbon transition risks for finance: what does theory have to say?”

Event description

Gregor Semieniuk presented the paper “Low-carbon transition risks for finance” he co-authored with  Emanuele CampiglioJean-Francois MercureUlrich Volz, and Neil R. Edwards. From the abstract:

The transition to a low-carbon economy will entail a large-scale structural change. Some industries will have to expand their relative economic weight, while other industries, especially those directly linked to fossil fuel production and consumption, will have to decline. Such a systemic shift may have major repercussions on the stability of financial systems, via abrupt asset revaluations, defaults on debt, and the creation of bubbles in rising industries. Studies on previous industrial transitions have shed light on the financial transition risks originating from rapidly rising “sunrise” industries. In contrast, a similar conceptual understanding of risks from declining “sunset” industries is currently lacking. We substantiate this claim with a critical review of the conceptual and historical literature, which also shows that most literature either examines structural change in the real economy, or risks to financial stability, but rarely both together. We contribute to filling this research gap by developing a consistent theoretical framework of the drivers, transmission channels, and impacts of the phase-out of carbon-intensive industries on the financial system and on the feedback from the financial system into the rest of the economy. We also review the state of play of policy aiming to protect the financial system from transition risks and spell out research implications.

 

Moderator:

Pierre Monnin
Senior Fellow, CEP

Gregor Semieniuk

Gregor Semieniuk is an Assistant Research Professor at the Political Economy Research Institute and the Department of Economics at the University of Massachusetts Amherst. His research focuses on the energy and resource requirements of global economic growth and on the political economy of rapid, policy-induced structural change that is required for the transition to a low carbon economy. Gregor has consulted for the United Nations Environment Program and the UK Government on policies accelerating low-carbon innovation, and has won grants to study these matters as well as transition risks for finance. He is also affiliated with the Department of Economics at SOAS University of London, the Institute of Innovation and Public Policy Purpose at University College London and the Science Policy Research Unit (SPRU) of the University of Sussex.

Paper and slides

“Low-carbon transition risks for finance: what does theory have to say?” (paper)

“Low-carbon transition risks for finance: what does theory have to say?” (slides)

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